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ASOS Warns of Falling Profits After Smash FY Results
ASOS is undergoing some big changes. Not only has the CEO stepped down, but the business has warned of potentially changing profits by about 40 percent, due to increasing prices and a strain on the supply chain.
The fast-fashion online retailer, which has been reporting strong profit growth as online sales continue to increase, is warning of a change in profits.
A major change is underway, as the current CEO of ASOS, Nick Beighton, is leaving his role. He has held the reins of CEO for more than six years and has worked with ASOS for 12. While they are in search of a replacement, they are temporarily passing the baton to the current COO and CFO, Mat Dunn. “A search for his successor will begin shortly,” the business said in a statement.
This came off the back of ASOS’ financial results, which reported a 21 percent increase in retail sales, and a 13 percent uplift in Active Customers to 26.4 million. Throughout the UK, ASOS reported 36 percent growth, 21 percent in the US, 15 percent in Europe and six percent for the rest of the world.
In spite of these increases, ASOS’ share prices have slipped 19.58 percent in the last seven days. The business has shed 42 percent in its share prices since the beginning of 2021. The latest tumble happened directly after Nick Beighton announced his departure from the company.
“ASOS has delivered another strong performance, with continued growth in customer numbers driving further increases in sales and profits,” shared the interim CEO, Mat Dunn. “Our success has been underpinned by our focus on delighting fashion-loving twenty-something customers with greater choice, service, and engagement. We have also continued to invest in our platform and offer, including the successful acquisition and integration of the Topshop brands. This performance is based on the hard work and determination of all ASOS-ers and I want to thank them for everything they have done.”
Despite this success of the financial year, the retailer is earning investors of potential profit slips, as much as 40 percent. This is likely due to the increasing strain on the supply chain, Brexit, growing freight costs, higher wages, and increased global demand.
“Looking ahead, while our performance in the next 12 months is likely to be constrained by demand volatility and global supply chain and cost pressures, we are confident in our ability to capture the sizeable opportunities ahead,” Dunn explained.
Over the course of lockdown, the company said that it saved significant costs as fewer customers returned items of clothing, resulting in a saving of £67.3 million (AUD124.48 million). But the rate of returns is reverting back to normal, the business said. Pre-tax profit rose 36 percent to £193.6 million (AUD358.09 million), but the business is warning that these could slip anywhere between £110 million and £140 million (AUD203 million to AUD258 million).
“In the last two years, we have transformed ASOS with investment in infrastructure and the customer offer; we have generated strong revenue growth and free cash flow and improved structural profitability.
“But we know there is more to do and today we are setting out details of our ambitious plan to significantly increase ASOS’s sales and profitability becoming a £7bn business within four years. I am delighted to be taking on the role of COO and will work tirelessly with all ASOS-ers to deliver against our refreshed strategy,” he said.
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